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Hearing of the Senate Small Business and Entrepreneurship Committee - The President's FY2006 Budget Request for the Small Business Administration


Location: Washington, DC

Senator Pryor. Thank you, Madame Chair, and thanks for having this hearing today. You and Senator Kerry both have shown great leadership on this issue in the past and continue to do so. I look forward to hearing from our witnesses. Thank


Senator Pryor. Thank you, Madame Chair.

Let me, if I may, follow up on a couple of points that the Chair made a few moments ago. The first thing that she talked about is how small business is really where the action is in our economy. That is particularly true in my State. When you
look at Arkansas, basically the backbone of my State's economy is agriculture andsmall business. When we look at job creation and job growth, even though we have a lot of great Fortune 500 companies in Arkansas, small business really is where the action is. So small business is something that I think we are all concerned about for our own reasons and our own

The other thing that she mentioned is the Women's Business Centers program, and I would like to ask you about that. During the last 10 years, the centers generated an estimated economic impact of $500 million. Do you agree with that figure, $500 million?

Administrator Barreto. I have seen some figures that relate to that. I am not sure what the methodology they use or how they track that, but I have seen some numbers showing that.

Senator Pryor. Somewhere around $500 million?

Administrator Barreto. I believe so.

Senator Pryor. You ought to know what that is because you are changing the program. With an investment of only $37 million over a 10-year time period there was a $500 million return on that investment. In other words, a $500 million economic impact. That seems to be a pretty good return on investment. Would did you agree with that?

Administrator Barreto. We totally agree with that.

Senator Pryor. Again, not to dwell too much on my State of Arkansas, but just recently this week there was an announcement that once again a small plant in a small town is going to lay off its entire workforce and close the plant. About 200 jobs will be going away.

But when you look at the Women's Business Centers and the activity that they have been able to generate in a small State like mine; I think that about 3,400 people have participated in the program, 300 businesses have been started or expanded and 500 jobs have been created; there has been a large impact. All this activity may have been in small communities, small businesses, but overall it has had a large impact on my State and I am sure it has had a similar impact around the Nation, as well.

My question to you is how you justify cutting funding for this program when it has created such sustainable jobs and sustainable businesses?

Administrator Barreto. Thank you for that question, Senator.

Let me first say that we agree with you, Women Business Centers are critically important. The purpose of Women Business Center Program is to provide these grants to non-profit organizations for them to start these Women Business Centers
and help the women businesses in their area. And they have done a good job to do that.

But the way that the program was envisioned is this was supposed to happen for 5 years. After 5 years these organizations would be self-sufficient. The problem that we have had is there are many areas around the country, in rural States like Arkansas and many urban centers that do not have Women Business Centers because they cannot get them because there is not enough money.

The intention of Women's Business Centers was to provide these groups and these communities a hand up, not a handout, a hand up. This was not supposed to be a static entitlement program.

The centers that are doing very well are centers that have been around for a few years. They are associated with a Chamber of Commerce or another business association and are also raising monies from other areas. These centers are not SBA centers. These centers belong to those communities. They belong to those organizations. We want to help them be successful.

So what we are basically suggesting is that we go back to what the original purpose of the program is. Los Angeles just got their first Women's Business Center, a city that has probably the most small businesses, the most women small businesses of any place in the United States, until recently could not even have a Women's Business Center. So those are the kind of opportunities that we want to address.

We think Women Business Centers are very important. We want to grow new Women Business Centers around the country.

Senator Pryor. But there again, let us get back to what you said a few moments ago. They have worked well.

Administrator Barreto. Yes, they do, they work very well.

Senator Pryor. So why change it?

Administrator Barreto. Because the original purpose of the program was to be a 5-year grant. That is the original purpose of the program. So what we want to do is help those Women's Business Centers be successful over that 5 years so they can become independent. The most successful ones are.

Please remember that the Women Business Centers do not receive all of their funding from the SBA. They leverage that.

Our most successful examples of technical assistant providers, the SBDCs, the SCORE, the Women Business Centers, leverage those investments. And that is how they become successful. That is what we want Women's Business Centers to do.

Senator Pryor. Let me go back to another one of Senator Snowe's questions to you that you did not answer, and that is
if the programs are working so well why cut their funding?

With her you gave a lot of background and you end up losing everybody. Again, why are you cutting funding for programs that are working so well?

Administrator Barreto. What we are doing is we are investing our resources in programs that are working well and that is shown by the numbers. Numbers are a stubborn thing. We are training more people than ever before. We are doing more loans to women. We are doing more contracting. We have doubled the number of loans that we have done over the last few years. We are reaching every community in the United States.

That is the bottom line for a business, you look at those success statistics. For us, we are doing more in every area.

Again, what the SBA does is we facilitate these programs and these opportunities. We work with many other resource partners. We are not the only ones that do these programs.

But what we do is very unique and not just anybody can do that. That is why I think that we have been successful over the
last couple of years.

Senator Pryor. Answer her question and mine. Why are you cutting funding for programs that work?

Administrator Barreto. Senator, with all due respect, you would have to be specific as to which program you are referring
to, and then I would be able to answer that question.

Senator Pryor. There is a long list of programs. Just pick one.

Administrator Barreto. I will answer any question you would like me to answer, Senator.

Senator Pryor. Let us look at the Women's Business Centers. Why are you cutting funding for this program?

Administrator Barreto. The original purpose of the program was for it to be a 5-year program. We want those Women's
Business Centers to be successful and we want to create new Women's Business Centers in areas that are not served right

There are many, many women's groups and women centers that come to us all the time, saying we would like a Women Business Center in our area. And oftentimes we have to say no, we cannot fund a Women Business Center because we do not have the resources to do that.

These changes that we are making to Women's Business Centers will allow us to do that, to start identifying new opportunities and make those Women Business Centers successful. We want to work with them in the early years so that they do not get to year five and then come back and say we are not going to make it without your funding.

Again, remember, these are not our Women Business Centers. These centers belong to those communities.

Senator Pryor. I think we are plowing the same ground over and over, and I guess I am not satisfied with your answer. But I have been handed a long list of programs that have been zeroed out. Just zeroed out. Not changed, but zeroed out.

Administrator Barreto. Again, it would depend on what program you are referring to. One of the things that we did, and it was referenced in the earlier testimony, is that we have asked for resources, for example, in our Office of advocacy, in
the Office of the Ombudsman, in the 7(j) Technical Assistance program, in the HUBZone programs, in the USEAC programs, in the Native American outreach.

But is not represented by a line item. In fact, we, as has been customary over the years, spend much more on those programs than is actually reflected in a specific line item.

Senator Pryor. For example, the PRIME program. You have taken that funding from $5 million to zero. Why are you doing
that? Has PRIME not worked well?

Administrator Barreto. One of the things that has happened is that----

Senator Pryor. Has PRIME worked well?

Administrator Barreto. The program is duplicative of what we are doing, the technical assistance that we can provide to
those communities.

I have a chart here I would like to show you. One of the strengths of the SBA is the fact that we have one of the widest networks of any agency or any Government department. This map right here reflects all of the resource providers that we have
in the United States. They are in every State, in every major metropolitan area. We believe that we can continue doing the job with the current network that we have.

So on programs that we feel are duplicative, yes, we are not going to ask for funding and we are going to continue to
fulfill that mission inside of the network that we currently have. We spend hundreds of millions of dollars on this network.
We want to make sure that it is being fully utilized.

The good news is that it is being fully utilized. Three years ago, the SBA counseled and trained through all of its
resource providers about 1.5 million small businesses in the United States. Last year we did 2.5 million, and it has been
level funding in those programs.

In other words, those programs are more productive now than ever before. And we believe they are going to continue being
more productive.

Senator Pryor. Madame Chair, I think I am overstaying my welcome. Thank you so much.

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